The central bank has recommended reorganisation and restructuring of publicly-owned entities, particularly in transportation and related infrastructure services, distribution of energy products and traditional industrial units.
"...Efforts are needed to address issues of reorganisation and restructuring of publicly-owned entities extending beyond the financial sector particularly in transportation and related infrastructure services, distribution of energy products, and traditional industrial units," the Bangladesh Bank (BB) said in its financial sector review, published Wednesday.
A BB senior official said the restructuring of public entities will have positive impact on the overall economy.
Besides, the central bank policy analysis unit (PAU) has stressed on minimisation of risks in the financial sector through improving efficiency of the banks and financial institutions.
Efficiency, competition, cost effectiveness, good governance and corporate social responsibility will be the basis of ensuring efficient inclusion of the poor having no access to bank credit and minimising risks in the financial sector, the review said.
The BB in the review recognised that there exists credit as well as liquidity risks in the financial market so that the priority in financial sector policies is to establish competitiveness in banking and non-banking sector with the ability to overcome maturity-mismatch and classified loan problems.
The central bank has taken several measures through implementing financial sector reforms and adopting new polices including restructuring of specialised banks, establishing a well functioning secondary securities market, and opening up of the financial sector to global level by ensuring proper financial regulation and supervision.
"As such, promoting healthy competition in the banking sector remains the corner stone of the country's financial policy stance," the review noted.
Chief Economist of the central bank Mustafa K Mujeri told the FE that the concerned authorities should take effective measures to reduce the financial risks that will also help cut interest rates on lending in the market.
"Concerned authorities have to play a due role for strengthening the country's financial market," Mr. Mujeri said adding that the capital market would be strengthened to minimise mismatch of funds in the banks and financial institutions.
The central bank has already taken initiatives to implement Basel-II norms of capital adequacy.
"Sound regulation and supervision will be essential to the success of these efforts to bolster the financial system through capital adequacy and fighting money laundering effectively," the review added.
One important element of the required financial deepening process including a fully functional bond market, both the primary and secondary, where government and corporate debt instruments are traded freely, the review said, adding that a viable mechanism for developing agriculture, industrial and infrastructural finance, and more active equity and insurance markets for improved and efficient allocation of risks in the economy.
The BB also sought a safe and efficient financial system in the country and ensuring its long term robustness.
Meanwhile, UNB adds: Commercial banks took around eight years to reduce the spread between lending and deposit rates of interest by about one percentage point, mainly depriving their depositors.
The interest rate spread (IRS) declined by 0.97 percentage points between June 2001 and March 2008, according to the Policy Analysis Unit (PAU) of Bangladesh Bank.
During the period, the deposit rate declined by 1.10 percentage points as against lending rate reduction of only 0.13 percentage points, said a Financial Sector Review (FSU) released by PAU today (Wednesday).
The PAU is to assist the Bangladesh Bank in promoting and maintaining macroeconomic and price stability conducive to rapid growth and sustainable poverty reduction through research and policy analysis.
The central bank has long been asking commercial banks to reduce the IRS below 5 percent, not through cutting from the deposit rate but from their lending rates, to stimulate investment and economic growth.
Chief Adviser Dr Fakhruddin Ahmed had also instructed the central bank to take measures to reduce the spread.
Bangladesh Bank had talks with the commercial banks, particularly the private banks, repeatedly requesting them to comply with the economic requirement.
